The Economics of Obesity

Every once in a while, my wife will drop a subtle hint that I need to lose weight like poking me in the tummy and saying, “Hey fatso.” Actually, I am not all that fat: only 20 pounds over my ideal weight, which is probably typical for an American male of my age. But, sure, I could do better, and I’m working on it, off and on.

So here’s an interesting question: why has obesity become such a problem in America and other countries in the early 21st century? The easy explanation is: we can afford to be obese. For eons, 99.9% of humans never were wealthy enough to afford to overindulge. For most of human history, the major dietary concern was getting enough calories, and this is still the major concern in much of the developing world. Our bodies are efficient at solving the problem of too few calories, but not so well equipped to solve the problem of too many calories. Our bodies are busy storing away calories for a famine that will never come, and we cannot reprogram them to better handle our current caloric prosperity.

The fundamental cause of obesity is the cheap availability of pre-prepared food. This includes snacks in vending machines, coffee and pastry at the coffee houses, fast food restaurants, and store baked cookies and other snacks. We are tempted at every corner to overindulge, and many of us do that.

Let me give a simple example of how ease of eating leads to overindulgence. Try the following experiment at your office: leave out a bowl of almonds with a sign saying, “Eat me” by the coffee machine. In first case, the almonds are unshelled and you leave a nutcracker. In the second case, the almonds are shelled. What do you observe? I can tell you: the shelled almond will be consumed in minutes, but the unshelled almonds will be largely ignored.

Why is that? It cannot be that the unshelled almonds aren’t as tasty. It cannot be that the calories needed to shell an almond are even remotely close to the calories you could get from eating the almond. The answer is that overindulgence is about ease of opportunity: if you increase the cost of getting the food, people will be less likely to indulge. But this doesn’t make rational sense: the effort is small compared to calories involved. If you were starving to death, the fact that the almonds were unshelled would make little difference to you, you would still eat them until the hunger subsided. But overindulgence is not about satiating hunger, but about acting on an instinct to eat food if it is available. If you have to put work into getting food, you think about it, and you might decide, “I really don’t need this.”

This is one reason why we tend to eat a different diet when we prepare our own food and when we go to a fast-food restaurant. When we prepare our own food, we are typically not hungry, so we think rationally about a good combination of taste and nutrition. When we get to work and look in the lunchbox when we are hungry we will eat whatever we packed and be satisfied with it, but we might have wished we had packed some cookies. When we go to a fast-food restaurant, we are already hungry and we have plenty of money to buy whatever. So when the server asks, “Would you like fries with that?” we might be tempted.

The vending machine is another big temptation. We may have neglected to pack cookies in our lunch but we can always put a few coins in the machine and get our snack. If you look at the people who frequent the vending machine, you will see that overweight people visit more frequently. It doesn’t matter if they are buying “healthy snacks,” they are buying food simply because it is readily available, and calories are calories.

The key to losing weight is to recognize that the true cost of food is the calories and not the money you spend. You have a calorie constraint of maybe 2000 calories a day. If you eat more than that you either have to burn those calories in exercise or you gain weight. If you gain muscle mass, you can eat more than 2000 calories a day and still be slim, but muscle takes effort to maintain. So basically, you have a budget constraint, and you should plan your diet each day according to that budget constraint.

Imagine if the food you ate were priced at ten cents per calorie, but you are given 200 dollars to spend on food or anything else per day. You wouldn’t starve, but you certainly wouldn’t overindulge. You would make much more sensible decisions about what to eat and how much to eat. You wouldn’t bother with that fifth slice of pizza and you wouldn’t be visiting the snack machine either. If you just believed that this is reality, you could easily lose weight.

The reason this strategy doesn’t work for me or for others is not because it is foolish but because we find it hard to stick to the plan for the many months and maybe many years necessary to make it work. It requires believing that you really cannot have that chocolate cake that the company offers free on special occasions simply because it will put you over your quota. You naturally think, “Life is short, and you only get so much cake offered to you. Eat it while you can.” This short-term vs. long-term conflict is at the heart of the obesity problem. And I am as guilty as most people in succumbing to the short-tem mentality.

Let me give you an analogy: suppose you went to college and they said, “Attend the lectures, read the text, and do the homework assignments. However, all tests will be given at the end of four years.” How many people could pass college in that way (not many)? People need to have a long-term goal broken down into many short-term goals. And someone needs to hold these people to these short-term goals, or else they can never pace themselves to achieve the long-term goal. People are not good at keeping with a long-term goal by self-discipline, but thankfully markets have emerged to help us.

So why haven’t markets emerged to help pace people to lose weight. Well, to some small extent some of the weight-loss companies are moving in that direction, but they are burdened by their original core philosophy: their wonderful food (in reality, not so wonderful) will help you lose weight. But a bigger reason is that it is too easy to cheat the system if you want to hold people to a weight-loss scheme. If you insist that someone must be less than or equal to X pounds by Y date, many people will get close to the date, discover that they might not make it, and then cheat by dehydrating themselves. This kind of test can also dissuade people from gaining muscle mass, which is very useful in losing fat.

The key is to develop an easy to use inexpensive technology that measures fat content and not just weight. Once weight-loss companies have this technology, then holding their clients to a reasonable weight loss goal will be safe and easy. They would be, in effect, increasing the cost of food, and forcing you to make more intelligent choices about food.

There are scales that claim to measure your body fat but my experience with them is that they are essentially useless. Underwater weighing can yield the true body fat, but it violates the easy and inexpensive criterion. This is an area that needs work.

But there is another big factor to consider which I wrote about here: once you figure out a workable system for motivating people to lose weight and you show that it works, what is there to prevent a thousand other firms from doing the same thing? You need to have an answer for that one as well.